With a traditional IRA, you can save now and be taxed when the funds are withdrawn in the future. It’s a tremendous tax-deferred retirement savings tool! Each year, contributions limits tend to fluctuate based on how taxes are filed. To gain maximum benefits from this powerful tool, staying up-to-date with these changing rules and regulations is essential. We can help.
A traditional IRA is intended for those looking to save money on their taxes now and want the potential for long-term growth. With this type of account, your contributions may be deductible, and you can reduce your current taxable income. Ultimately, we can help you weigh the pros and cons of both Roth and Traditional IRAs so you can decide which option is best for your financial goals.
When deciding whether you should open a Roth IRA or a traditional IRA, taxation is one of the essential distinctions to bear in mind. Contributions to your Roth account are made with after-tax money; however, future qualified withdrawals from this account won’t be taxed. On the other hand, contributions to a traditional IRA may be tax deductible in that year and are subject to taxes once you withdraw them later on – when they will then be taxed like income.
If you are deciding between a traditional and Roth IRA, one key difference to be aware of is the required withdrawal. Compared with other accounts, when it comes time for retirement, an individual with a traditional IRA must adhere to the Required Minimum Distributions (RMDs) set by the IRS once they reach 72 years old. On the opposite end of that spectrum – those who choose to invest in Roth IRAs have complete discretion over any withdrawals made, meaning if they don’t need the money, their funds can continue growing tax-free!
It’s essential to stay informed of the latest trends in investing to reach your retirement goals. Everyone has different dreams for their retirement, so individualized portfolio planning is critical. By being well-versed in all the available options, you can make sound decisions with your financial advisor that will align perfectly with your aspirations. With this knowledge, you can relax, knowing that every decision made concerning your portfolio perpetuates a future filled with fulfillment!
If you have taxable income, contributing to a Traditional IRA is an opportunity for you. Moreover, if both spouses are married and file a joint tax return with one having taxable compensations, the other spouse can also make extra contributions!
You can opt for cash or check when making Roth IRA contributions. This option allows you to add diversity to your savings and helps align it toward your planning goals.
In 2023, you can contribute a maximum of either 100% of your taxable compensation or $6,500 to your Traditional IRA. If you’re over 50 years old, an additional “catch-up” contribution of $1,000 is allowed so that the total amount contributed would be no greater than $7,500.
Maximizing your retirement savings is possible by utilizing a 401(k) and Roth IRA. A Roth IRA provides greater flexibility, allowing you to allocate and manage contributions however you’d like. This combination of financial accounts can enhance the options for stashing away funds for later years – so take advantage of this chance!
A Traditional IRA benefits everyone, offering tax savings that correspond with the sum of money contributed.
Situations come up in life that requires money quickly, and older folks often have more medical costs to consider. For example, if you’re younger than 59 ½ years of age and withdraw from your Traditional IRA account, the IRS will likely hit you with a 10% penalty on top of income taxes for the funds. Fortunately, suppose those funds are going towards college tuition fees, buying your first home, or covering healthcare expenses due to death, disability, or unemployment-related health insurance needs. So, in that case, it’s possible to avoid paying any penalties at all!
Depending on your modified adjusted gross income (MAGI) as defined by the Internal Revenue Service, it may be impossible for you to contribute financially towards a Roth IRA.
If your income or joint income falls within the MAGI charts, you’ll need to review them to identify if it is eligible for Roth IRA contribution limits. For example, if your MAGI happens to be located in the “partial” range, a tax professional can assess precisely how much you are allowed to contribute to an IRA.
If you are married, filing a joint tax return, and earning an income, then it is feasible for you to contribute to your spouse’s Roth IRA.
Some IRA’s have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. Retirement Plans: Distributions from traditional IRA’s and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty. Roth IRA: Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
In this call (or in-person meeting) we listen to you & assess your goals. We will begin to take you through our Investment Roadmap Tool® to determine how to get from where you are now to where you want to be.
From this call, if we find that we are a good fit for one another, we will develop & execute a plan that has been custom built for you to work towards your investment goals.
We will meet with you each year to review and adjust your plan so you can face your future with confidence. Being confident in your progress gives you the freedom to invest your life in what matters most.
This testimonial and/or endorsement was given by client of the financial advisor and no compensation was provided directly or indirectly. This testimonial and/or endorsement is not a guarantee of future performance or investment success, and the testimonial and/or endorsement may not be representative of the experience of other customers. Please visit BrokerCheck (https://brokercheck.finra.org) to see more on the background of this professional.
We serve the Greater Pittsburgh and Eastern Ohio Areas. We have offices located in both Grove City, PA and Greenville, PA. If you are looking for a financial planner near you who is committed to helping you with wealth management, we are here to help!
